Any thoughts on getting this right using satellite data alone instead of drones? What are the challenges?
First, this requires high resolution imagery to make out fine details. You have providers who can provide imagery with 0.3-2m resolution, but these can be expensive and not so easy to obtain. Satellite imagery for true colour is also affected by atmospheric conditions such as presence of clouds, which can occlude the view. Infrared bands can peer through this cover, but then they are not much use in surveying. Besides, you will need to wait for the satellite to make a pass over the target area to obtain the image, so the imagery can be out of date or captured at the wrong time e.g. if land is submerged under floods, so details are not visible. There is of course the upside that satellite imagery can cover huge swathes of land at once.
Drones are cheaper and can be flown over the target area on demand to generate true orthophotos from overlapping photos (https://en.wikipedia.org/wiki/Orthophoto).
The problems you mentioned about needing to wait for satellite passes etc, would exist and may be worse with drones.
In a country like India, cloud coverage during the rainy season can last for months, rendering satellites (unless you use something like SAR with false color composites) effectively unusable. Drones may not be able to fly during periods of rainfall, but can still be operated in daylight during breaks in weather.